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December 9, 2019 4:30 PM, EST

Diesel Drops 2.1¢ to $3.049 a Gallon

The only area of the country where the average diesel price rose is New England, where it rose 0.7 cent. The West Coast saw the biggest drop at 5.7 cents. (Thinkstock Images)

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The U.S. average retail price of diesel dropped 2.1 cents to $3.049 a gallon, the Department of Energy reported Dec. 9.

Trucking’s main fuel costs 11.2 cents less than it did a year ago, when it was $3.161 a gallon, according to DOE.

Regional average diesel prices dived in all areas except New England. There, diesel prices rose 0.7 cent to $3.085 per gallon.

The regional price that dropped the most belonged to the West Coast, where diesel prices fell 5.7 cents to $3.647 per gallon.

Average U.S. gasoline prices fell 1.4 cents to $2.561 per gallon. The fuel fell in all but two regions.

In the Lower Atlantic states, gasoline rose 1 cent to $2.393 per gallon. It remained unchanged in New England at $2.478 and fell the most in the West Coast region, where it dropped 7 cents to $3.337 per gallon.

The reason for the drop in diesel and gasoline prices in the United States was a combination of warmer-than-expected December weather and weak consumer demand, according to Tom Kloza, global head of energy analysis for the Oil Price Information Service.

Kloza pointed to information from DOE’s Energy Information Administration, which showed inventories of crude oil, gasoline and distillates increasing. The jump in gasoline and distillate inventories surprised some people, Kloza said, because seasonal demand and an international switch to cleaner ship fuel was supposed to cause smaller stocks.

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The change in shipping fuel, away from higher-sulfur bunker fuel, was mandated by the International Maritime Organization to take effect Jan. 1. The change was expected to affect diesel prices, as the fuels draw from distillates. But diesel price has been stable.

“It’s been very disappointing for people who are bulls,” Kloza told Transport Topics. “There were a lot of expectations for diesel.”

Oil fell to the lowest level in nearly a week as the U.S. crude and fuel inventories increased. On Dec. 11, West Texas Intermediate for January delivery settled 48 cents lower to $58.76 a barrel on the New York Mercantile Exchange.

Brent for February settlement fell 62 cents to close at $63.72 a barrel on the London-based ICE Futures Europe Exchange. The global benchmark crude traded at a $5.07 premium to WTI for the same month.

On the refinery front, U.S. plants have been preparing for the IMO mandate for years, according to Dean Foreman, chief economist of the American Petroleum Institute.

Foreman said U.S. diesel demand in October averaged 4.2 million barrels a day, just a breath from the all-time record of 4.3 million barrels a day in October 2018. Additionally, U.S. oil production is hitting records.

Foreman told TT that the October average oil production was 12.6 million barrels a day. November likely will be a new record, at 12.8 million barrels a day, Foreman predicted, noting the numbers have not yet been finalized. Still, U.S. gasoline and diesel prices have been stable because the nation has so much supply as well as refining capacity.

Foreman said it’s “pretty remarkable” oil price has not nudged higher given the U.S. production and refining, but much of that oil is not even used domestically. The United States has been exporting about 3 million barrels of oil a day, he said.

Greg Harlow, owner of Home Run Trucking of Xenia, Ohio, said he has no major complaint with diesel prices. The fuel has been fairly stable in cost, he said.

Harlow said it has been a good year for his truckload fleet of 250 tractors. But other factors can add costs, even if diesel prices remain low. He said if there is a tough winter coming, his trucks will have to idle more to prevent freezing. Idling is a practice fleets try to cut down on, as it increases diesel costs.

Harlow told TT he also is concerned about the politics of impeachment unsettling the economy.

“If this economy continues with optimism, growth will tick up,” he said.

Home Run focuses on transporting building materials and, for now, construction business has been good, Harlow said.

The strong U.S. supply and moderate oil price has not been kind to all energy companies. Chevron Corp. expects to write down as much as $11 billion in the fourth quarter, more than half of it from its Appalachia natural gas assets, after a slump in prices, according to Bloomberg.

Chevron follows Schlumberger Ltd. and Repsol SA in ascribing lower values to their assets at a time when the growing adoption of cleaner energy stokes speculation that demand for fossil fuels may peak in a few years, while supplies keep rising, Bloomberg reported. The oil-services giant posted a $12.7 billion writedown in October, while the Spanish producer took $5.3 billion off its balance sheet last week.

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